Credit card rewards help foil recession

More Americans are turning away from air miles and toward other rewards.

Cash back cards remain top option for people hoping to pad their wallets.

New credit card laws will likely have an impact on rewards offerings.

Tough economic times are changing the way Americans collect and redeem credit card rewards program points.

Gone are the days of hoarding loyalty and rewards program points for an all-expenses-paid trip to Paris or a weekend romp in Las Vegas. The recession has brought consumers' point redemption habits back to earth -- literally.

For the first time in history, more U.S. consumers belong to credit card rewards programs than to airlines' frequent-flier programs, according to the 2009 Loyalty Marketing Census conducted by Colloquy, a Cincinnati-based provider of loyalty marketing publishing, education and research.

Loyalty points and cash back bonuses on everything from gasoline and groceries to theme parks and movies offer real help to consumers struggling to make ends meet, says Ken Clark, a Certified Financial Planner and author of "The Complete Idiot's Guide to Getting Out of Debt."

How can loyalty programs help you get through tough economic times? Here are some ways to maximize the returns -- and avoid the fine-print pitfalls -- of today's rewards programs.

Cash is king

These days, there's no shortage of rewards program choices. Some companies allow cardholders to collect points for every dollar they spend. Those points can then be redeemed for gift certificates at specific retailers. Others offer savings at grocery stores, restaurants or gas stations.

However, one type of rewards program still trumps the rest when it comes to helping consumers boost their bottom line in tough times, says Ruth Susswein, deputy director of national priorities at Consumer Action, a San Francisco-based national nonprofit organization specializing in consumer protection.

"Of all the different rewards programs, cash back still offers the most value," Susswein says.

That's because consumers can use cash anywhere for any purpose "as opposed to being locked into a certain program," she says.

What's more, Clark says cash back programs offer faster returns at lower levels of spending when compared to other programs. For example, mileage programs may require cardholders to spend upward of $30,000 to earn an airline ticket, Clark says.

Some financial institutions are making it even easier for consumers to use cash back savings to fatten their wallets. For example, such cards may reward customers with 1 percent cash back on credit card purchases and then automatically transfer the rebate to pay off debt, build savings or pay down mortgage principal.

"In the end, maximizing the value of a rewards program entails finding a card that meets your unique needs," Clark says.

After all, some cards offer more points or a higher percentage of cash back for certain types of purchases. For example, if your summers are spent taking road trips, your best bet might be to select a card that offers the highest percentage of cash back on gasoline expenditures.

Possible pitfalls

While many of today's loyalty and points programs can have a healthy impact on a struggling family's bottom line, some have negative features that can quickly eat into any potential savings.

For example, it's best to avoid rewards cards that charge an annual fee.

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